QUESTION: If a board member (female) provokes another member to step outside the club house (where we hold our monthly meetings) by stating "Step outside old man, I will beat the crap out of you," how do we respond to the threat?
ANSWER: I know a Marine recruiter who would like to talk to your aggressive board member. A year in the mountains of Afghanistan might burn off some of her aggression. If the Marines deem her unmanageable and decline to recruit her, there are other things the board can do.
Don't Engage. Under no circumstances should the threatened director engage "Battling Betty" in a boxing match. No good would come of it. Any physical injuries and subsequent litigation would likely not be covered by the association's insurance. Perhaps readers with insurance expertise could comment on this next week.
Censure. Any director, including the person being threatened, can make a motion to censure Ms. Betty. Such behavior is unacceptable and the board should express its displeasure in the form of a censure. For more information on when and how to implement a censure, see "Censuring Directors."
Ethics Policy. Your board should adopt an ethics policy. In addition to covering a director's fiduciary duties, it should cover things such as proper interaction with employees and vendors, proper decorum by directors, and conflicts of interest. See sample "Ethics Policy." While you are at it, you should also adopt an "Anti-Harassment Policy."
Lawyer Letter. To discourage future threats of physical harm, the board can direct the association's legal counsel to send a letter to Ms. Betty admonishing her and making it clear such behavior would result in a restraining order if it were to continue. Sad to say, our firm has obtained many "workplace violence" restraining orders over the years to protect association employees and board members from abusive residents. (Code Civ. Proc. §527.8.) On occasion, we've had to threaten a board member with legal action, but that is usually sufficient to stop the bad behavior.
Temporary Restraining Order. If threats of violence continue, the association's legal counsel can seek a temporary restraining order (TRO) against the misbehaving director without a hearing or notice to the other side. The TRO lasts until there is a court hearing (usually in 15 to 25 days). The association's legal counsel can take action against a board member because the attorney does not represent directors but, rather, represents the corporation which speaks through its directors. There are times when the corporation may need to take action against a director.
Credible Threat of Violence. A hearing date follows the TRO at which time a protective order may be issued if the court finds there was a credible threat of violence against by Ms. Betty. A “credible threat of violence” means a knowing and wilful statement or course of conduct that would place a reasonable person in fear for his or her safety, or the safety of his or her immediate family, and that serves no legitimate purpose. (Code Civ. Proc §527.8(b)(2).)
Up To Three Years. A workplace violence restraining order is good for up to three years. (Domestic violence restraining orders can last up to five years.) Battling Betty may be required to turn in any weapons she possesses and stay away from the protected director a prescribed distance, e.g., 50 or 100 yards. That means Ms. Betty might not be able to attend board meetings except by telephone.
RECOMMENDATION: Your board has a range of options available to it. Talking to the uncivil board member may be sufficient to stop her bad behavior. If not, decisive action should be taken by the board. Otherwise, there could be potential liability for failing to act in the event injuries occur.
FOR EVERY QUESTION
QUESTION: Our board president calls the HOA attorney on every question that arises, regardless of significance or the cost of those calls to the HOA. What can be done to reign him in?
RESPONSE: I've not met your president but I already like him. Associations face increasing potential liability with the myriad of new laws added to the books each year. It is difficult for large associations to comply with all of them and virtually impossible for small associations. (The Legislature needs to provide some relief for small associations.)
Volunteer Under Pressure. Most board members already have busy lives and are volunteering their time to make decisions on matters over which they have no expertise, such as insurance, roofing problems problems, contract negotiations, safety issues, water damage liability, employment law issues (hiring, firing, disciplinary actions), harassment claims, requests for reasonable accommodation, architectural disputes, unusual or excessive records requests, etc. Boards have the added pressure of doing this with owners nipping at their heels, second-guessing every decision, and threatening lawsuits.
Business Judgment Rule. To avoid personal liability, board members are required to make decisions (i) in good faith, (ii) in a manner which the directors believe to be in the best interests of the corporation, and (iii) with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. (Corp. Code §7231(a).) Boards may rely on the advice of persons they believe to be reliable and competent in the matters being presented. (Corp. Code §7231(b).) This means boards can rely on CPAs for financial and tax issues, attorneys for legal issues, etc.
Legal Budget. Boards are increasingly dependent on legal counsel from attorneys specializing in common interest developments. Too many associations, however, are significantly under-budgeted for legal expenses. Some boards innocently believe they can make it through the year without incurring any legal expenses. All it takes is one major flood or, worse, one deranged homeowner to spike an association's legal fees.
Daily Calls. Calling an attorney daily with questions is usually not necessary (unless there is some significant legal matter underway). To keep costs down, some law firms, including ours, offer a retainer program that allows free unlimited brief phone calls (emphasis on brief). This allows the president to pick up the phone and call legal counsel without fear of being charged for every call. That means he/she can quickly find out if an issue can be resolved without legal involvement or is one that could spin out of control unless legal counsel steps in.
RECOMMENDATION: Investigate setting up a retainer agreement with your law firm. In addition, increase your budget for legal counsel. Legal assistance is a necessary business expense that can protect associations from costly litigation and potential liability (that could lead to special assessments). Remember where you live. This is California--one of the most litigious states in the nation. An ounce of prevention...
Changing the Look. Regarding building aesthetics, you rightly say that it is impossible to please everyone. However, everyone had a choice to buy or not if they didn't like the aesthetics. In my opinion, to later force an arbitrary change is wrong. In this case, there could be privacy and security issues with front door windows. It has been my experience that board members do not do the proper research to make the decisions that they do. -Paul C.
RESPONSE: As I noted in my last newsletter, feelings run hot when it comes to aesthetic issues. You may not like it but the Supreme Court has already noted that associations have the authority to make decisions for the general welfare that may harm the interests of an individual owner. (Nahrstedt v. Lakeside Village.)
No on SB 323. Thanks for the alert about SB 323. It was referred to the judiciary Committee, too. Gives two chances to stop or amend it. -Henry C.
No on SB 323. May I also suggest sending messages to Governor Newsom, urging him to veto the bill if it should reach his desk. -Michael E.
RESPONSE: We aren't ready for emails to Governor. If this dreadful legislation passes both houses and lands on the Governor's desk, we will alert everyone and ask for letters to the to Governor. In the meantime, anyone who has not yet sent a letter, please click here to send a pre-drafted email to the Assembly Housing Committee.
Motus Insurance Debate. Thank you for continuing to provide one of the best educational resources out there for this industry. While the Motus program has been a hot topic in the newsletter, I think the recent note on it requires a bit of clarification. I don’t think that Motus inferred that master coverage was currently needed to obtain personal coverage. They’d stated that because such a small percentage of condo owners carried personal HO-6 policies, the uninsured majority don’t currently have a good option for earthquake insurance unless the HOA carries a master policy (since earthquake insurance is typically a companion policy to the HO-6 policy).
On California Earthquake Authority (CEA) not being able to do the proper underwriting, this is true as their pricing is based purely on coverage options and geographic territory, not actual policyholder exposure. For instance, an owner in a 400-unit condominium association will have higher exposure to loss assessment than an owner in a 12-unit condominium association, but the CEA will price both owners’ policies identically if they’re in the same geographic territory and carry the same coverage options. I’m a big fan of CEA, though the broad-strokes approach taken for loss assessment pricing is certainly a shortcoming, especially in certain parts of the state where loss assessment really drives premiums. -Brian Kalmenson, Commercial Insurance Specialist, Kirk Miller Insurance Agency
RESPONSE: Discussion of the pros and cons of Motus insurance has been interesting. At this point, I will leave it to the insurance industry to sort out. Those who wish to pursue this further should talk to their insurance agent.